Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 2 - Evidence, February 11, 2014
OTTAWA, Tuesday, February 11, 2014
The Standing Senate Committee on Transport and Communications met this day, at 9:30 a.m., to examine the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.
Senator Dennis Dawson (Chair) in the chair.
[Translation]
The Chair: This morning, we are continuing our study into the challenges faced by the Canadian Broadcasting Corporation in relation to the changing environment of broadcasting and communications.
[English]
Today's witness is the Honourable Konrad von Finckenstein with us by way of video conference from Naples, Florida. He was Chair of the Canadian Radio and Telecommunications Commission from 2007 to 2012. Before taking up that position at the CRTC, he was a justice of the Federal Court of Canada from 2003 to 2007 and Commissioner of the Competition Bureau from 1997 to 2003. Mr. von Finckenstein is currently a Senior Fellow at the C.D. Howe Institute.
Welcome. The floor is yours.
Hon. Konrad von Finckenstein, as an individual: Thank you for inviting me. As you know, I am retired now, so I am appearing from video conference in Florida.
I understand you are concerned about the general state of broadcasting and communications in Canada, and in particular, you are concerned about the future of the CBC in light of the impact of the Rogers-NHL deal, the impact it will have on CBC's schedule and the entailing significant losses of advertising revenues.
These are in addition to the $115 million in government cutbacks that will be implemented over the next three years.
Before addressing the CBC, let me say a few things about the state of broadcasting. As a result of the digital revolution, we have seen a massive technological and corporate concentration in Canada, the tape technologies used to transport voice, photo, video, data, over telephone lines, coaxial cables, fibre optics or through the ether.
Consequently we have also seen an enormous amalgamation between telephone companies, broadcasters, cable companies, Internet service providers, satellite providers and cellphone providers. In effect, we now have four giant companies dominating the scene: Bell, Rogers, Shaw and Quebecor — and a myriad of other strong players, the most significant of which is Telus.
Our communications systems are based on legislation stemming from the 1990s and make distinctions between telephone, broadcasting and radio communication, although in reality today, they're all one and the same. Nonetheless, we have a vibrant modern system serving Canadians very well. In the broadcasting area, we have an offering that is extremely rich in variety. The integrated play-to-players produce broadcasts and distribute content using any means the customer desires.
However, the market is changing rapidly. People are no longer interested in scheduled programming but want to access the content they like when they like it, in the format they prefer. This has been a tremendous challenge to broadcasters, and they have responded with specialty channels, video on demand, video recording, streaming, et cetera.
At the same time, the new media has sprung up and is delivered over the Internet without any regulation — all content, either by wire or wireless. The recent arrival of OTT — over-the-top television — like Hulu and Netflix, presents an enticing alternative to regular television. One of the greatest challenges for broadcasters is how to keep people from cutting the cord and seeking their content from the Internet without bothering to go through traditional delivery means via cable, fibre optics or satellite.
This is the scene in which the CBC competes; however, the CBC was set up in a day of regulated broadcasting over the air. The key aim was to reach every Canadian in every part of Canada and provide them with national content. As a result, the CBC today has quite a few obstacles.
First, it is a Crown corporation — an agent of Her Majesty, with all the onerous reporting and approval requirements that entails. It is subject to annual funding, which has significantly shrunk over the years. It is subject to a host of oversight bodies, such as the CRTC, the minister, Treasury Board, a parliamentary committee, commissioners of access to information and privacy and official languages, et cetera.
Its governance structure is also very outdated and comes from the 1980s. For instance, the president is appointed by the Governor-in-Council not by the board. The board members cannot have a financial interest in broadcasting, yet they run a broadcast corporation. The corporation needs Governor-in-Council approval to buy and sell shares in other companies. It cannot own any subsidiaries. The list goes on.
It is limited in finding new sources of revenue; for instance, recently it needed to seek CRTC approval to introduce advertising on CBC Radio, which came with a lot of strings attached.
That being said, however, the CBC is also its own worst enemy. It has not articulated clearly and precisely how it intends to thrive in the new digital environment, given its mandate and the fiscal restraints. Its strategies appear to be a vague repetition of what is set out in the Broadcasting Act.
The second main issue is that it is perceived by many as having a bias in its information programming and often behaving as the unofficial opposition to the government of the day.
In this fragmented digital world in which the CBC finds itself today, in order to lessen the impact of the loss of Hockey Night in Canada, the CBC should seriously examine its strategies and find ways to show Canadians that the public broadcaster continues to have an important place in the Canadian communication landscape. In my view, such strategies should include, first, clearly stating that its objective is not to compete with private broadcasters but to fill the gaps left by them. A clear example might be local programming. Canadians have a clear preference for it, but this thirst is not satisfied.
They might also abandon areas well served by the private sector. Children's television comes to mind. Canada is a world leader in it. Why should the CBC compete with private broadcasters in these areas?
It should also announce that its objective is to be a trusted and objective news voice of Canada and follow through by taking necessary steps to become such a voice. It might want to consider abandoning over-the-air broadcasting, except in remote northern regions. After all, most Canadians get their television over satellite or cable; 96 per cent have access to cable. Why, then, waste all this effort to maintain a huge network for over-the-air broadcasting that serves less than anywhere from 4 to 6 per cent of the population? Obviously, it would require CRTC approval to change the rules for mandatory local carriage, but this is certainly an achievable goal.
It should also produce more niche content appealing to special Canadian tastes that are not being served by commercial broadcasters and find the right models to distribute such content. It should continue to produce more content for new media and find new ways of marketing. Their deal with Netflix is a move in the right direction. All signs indicate that digital wireless distribution will be the way of the future.
They should also seek greater flexibility from government in terms of oversight in order to compete in the modern, hyper-competitive media environment. For instance, I don't see that it's out of the world to seek permission to create subsidiary corporations that would not be agents of Her Majesty and would therefore be less constrained and could cut joint venture deals with other broadcasters and producers.
First, the government, for its part, if it wants to see the CBC thrive and flourish, should give it multi-year stable funding. No matter what the level, they need more stable funding over a longer period than one year. Who can plan anything with a full year? Second, the regulatory oversight should be lessened. And, third, the corporate structure should be modernized.
There's definitely a role for the public broadcaster in the digital world, but it's not the role envisioned in the 1930s or even the 1990s. In today's world, where the methods of delivery are various and relatively cheap, the emphasis should no longer be on broadcasting but public funds should be focused on producing or caused to produce, first, quality programs that are unlikely to be offered by commercial broadcasters and, second, objective information programming about events in Canada and around the world so as to become a trusted source of news.
Without these changes in attitude and strategy by both the CBC and the government, I feel the present slow decline will continue.
Thank you for listening, and I'm prepared to answer your questions.
The Chair: Thank you. I have five senators on my list right now.
Senator Eggleton: Thank you, Mr. von Finckenstein, for being with us today, and hopefully in a warmer place than it is up here.
I want to ask about a comment you made on not competing with private broadcasters, the CBC should not compete with private broadcasters.
Given the Rogers-Bell deal with respect to hockey that's going to take away substantial advertising revenue, are you suggesting that maybe CBC should get out of the use of commercials, out of revenue from that source?
Mr. von Finckenstein: No. This is a good question, whether public funds should be used to compete with Rogers or whoever else was bidding for Hockey Night in Canada in order to obtain that programming. Clearly, this is a program that Canadians want to watch, which has a huge commercial value, et cetera, and its commercial partners are willing to serve it to all Canadians. So why then have public funds used to compete with private funds?
When we were at the commission, we were always struggling with this. We wanted to see the CBC thrive, prosper and go forward, but the public funds should be spent in such a way that they don't compete. In effect, to not constitute subsidized competition to the private sector.
Senator Eggleton: So in order for the CBC to fulfill its mandate and help promote the cultural identity of Canadians, should there be other revenue sources explored or should it mean more money being allocated by the government?
Mr. von Finckenstein: It's a bit of a chicken and an egg problem. First of all, I don't know what the government policy is with the CBC, and I don't think you fully know either. I've never seen it stated anywhere. I go on the assumption that because we have the legislation there and it's quite clear what Parliament wants to do, that yes, we want to have the CBC and we want it to thrive. So therefore it has to be properly funded. It is not right now.
The funding right now comes from a mixture. It comes from advertising and parliamentary funding. Is that the right way to do it? If so, fine.
As I said in my opening remarks, the funding should be stable and predictable so you can do some planning. In addition, while the CBC should offer programming that's not done by commercial broadcasters, I don't see any reason it can't have advertising or charge for it, like specialty channels or subscription revenue. If people want the content, why shouldn't they pay for it?
Senator Eggleton: Let me ask you one more question. You mentioned Netflix and over-the-top broadcasting services. Netflix is not contributing any revenues to the Canadian broadcasting system. It's not subject to Canadian content requirements. What policy should be implemented to address those concerns?
Mr. von Finckenstein: For one thing, the CBC obviously pays for the content it gives to them, which you can watch on Netflix. So they pay for the content. Their delivery is over the Internet. They're not licenced in Canada. I think licensing in Canada could technically be done but it would be foolhardy because it can easily be bypassed.
I would prefer to see a Canadian Netflix emerge, but so far it hasn't. This is the way of the future. People will get the content they want where they want it, and they'll pay a price for it. I think we have to face the fact that we're not going to be able to change it. So the question is how to fit the CBC in that new environment.
Senator Demers: Thank you very much, Mr. von Finckenstein.
Canada has three separate statutes that govern broadcasting, telecommunication, and radio communication. In order to do better manage the Canadian communication system, should this governance structure be modified? And, if so, how?
Mr. von Finckenstein: Absolutely. During my five years as chairman of the CRTC, I always said that broadcasting, telecom, and radio communication is yesterday's world. It doesn't fit anymore and people use it in order to game the system, to get advantages. There should be a wholesale reform or if not then certainly a partial reform.
If the government wants to have the oversight of the telecom policy responsibility, absolutely they should have it. But the day to day administration of how you run a telephone service — whether it's wireless or wire line, the auctioning, the whole process of making submissions, et cetera — should be much more transparent.
You could take part of the responsibility under the act and put it under the CRTC or create a new body, et cetera. But right now policy and broadcasting production is the responsibility of the Minster of Heritage. The day-to-day regulation of telecom and broadcasting is the CRTC. And on this side you have the Minister of Industry responsible for the spectrum, telecom, anything wireless. It creates unnecessary friction, duplication and the players in the game try to take it to their advantage.
Senator Housakos: Good morning and thank you for being with us. I have three questions on the first round.
First, I'd like to have your opinion on the fact that it has now been decades that the Canadian government has been spending billions and billions of dollars through the CBC/Radio-Canada with a mandate to promote Canadian content. From your experience at the CRTC, would you be able to tell this committee if what we're doing right now with our billion-plus dollars a year in promoting Canadian content is best served through the CBC/Radio-Canada, especially underlying the terrible ratings that CBC English in particular has been scoring over the years?
If the CBC's not doing the best with the resources they have in promoting Canadian content, is it possible, sir, that the Canadian public is just not buying into this concept of Canadian culture and Canadian content as much in 2014 as they did in 1960 or 1970? I'd like your thoughts on that.
Mr. von Finckenstein: It's a very difficult question. Canadian content has always been seen as terribly desirable under the Broadcasting Act and that the CBC and the system should produce and that Canadian consumers should consume. Unfortunately, we find out Canadian consumers don't only want Canadian content but other types of content. It's always a bit of a push-pull situation.
We have various mechanisms both in terms of direct funding of Canadian content and regulatory devices that we employ, as well as the CBC in order to produce the Canadian content.
Can we do better? I'm sure we can, but just looking at the ratings is somewhat unfair to the CBC because they are producing a lot more drama than private broadcasters; and excellent drama. Part of the problem is the audience is small. It will cost just as much to produce drama in Canada as in the U.S. where the market is 10 times as large. So the returns you get are disproportionate.
To put this in balance is issue everybody is struggling with and no one has the perfect solution for it.
Can the CBC improved? Undoubtedly. But to give you a global judgment on whether money spent on the CBC is worthwhile or not, who can say? Unless you do either extensive cost benefit analysis, or some survey through the public. I don't think there is an easy answer to give. I'm sorry, it sounds like I'm skating. I'm not trying to skate. I'm stuck on the answer to your question.
Senator Housakos: I appreciate your candidness. I'll put questions two and three together and give you an opportunity to comment on them.
Maybe you can tell the committee why it took the CRTC 13 years to renew the CBC licences. I would also like your comment on what your thoughts are on recently allowing advertising on CBC Radio 2, and is that a prelude to maybe in the future going to an advertising system for CBC Radio 1?
Mr. von Finckenstein: On the first part of your question regarding why it took so long, that is because the agenda of the CRTC while I was there over the five years was extremely charged. We had a huge number of issues and hearings to deal with. We had an average of 12 hearings a year, which is quite a lot when you think of the work needed and when trying to deal with things like net neutrality and so on.
But the other thing is that there is very little the CRTC can do vis-a-vis the CBC. The funding is from government. Anything you try to impose on them, they will say, "Wonderful, but who is going to pay for it? I don't have the money."
In effect, the only means you have to deal with them is you cannot renew their licence; that's not going to happen, and we know that. So essentially the regulation and the supervision of the CBC by the CRTC is a certain ritual, but there is very little you can put into effect if the CBC doesn't want to do it. And if you give them more money, you always get the question to which I don't know the answer: Why are you doing this? Why should not the government do it? The government is the shareholder and the funder. If this is such a vital thing for the CBC, why isn't the government doing it?
For instance, the Local Program Improvement Fund, LPIF, generated about $100 million to small, local stations so that they could strive. It had to be spent on them for their local programming. But more than 50 per cent of that went to the CBC. We were hugely criticized. Why are you funding local CBC stations? I said, "I'm funding local stations, whether CBC or private, it doesn't make a difference. A local person is entitled to their local programming."
As far as advertising is concerned, I think let the market decide. If the CBC thinks the only way they can survive is to put advertising on CBC Radio, then let them do it. Let's see what happens. You might have viewers turning off and saying, "I don't want this."
Your colleague asked me before whether we are getting our money's worth. That would be one good way of finding out. Are people saying, "The content is so good I'm willing to buy the commercial"? Or is it "I listen to CBC Radio because it has no commercials. If it had commercials, forget it"?
Senator Housakos: One last question. From your experience at the CRTC, is there any mechanism put in place to verify that there isn't any advertising slot dumping being done by the CBC or any other private broadcaster? In your opinion, is that a problem or, generally speaking, in the Canadian market, that hasn't been a problem in the past?
Mr. von Finckenstein: Advertising dumping?
Senator Housakos: Yes.
Mr. von Finckenstein: To my knowledge, as the CRTC we never looked into how the advertising is handled. We let the market play it out. We did not address it or investigate it in any way — at least not in the five years that I was there.
Senator Mercer: Thank you for being here, Mr. von Finckenstein. I appreciate you taking time to be with us.
I have a couple short questions. In your opening statement, you talked about the great shift in how people are viewing television and/or other entertainment in that it's "I want to watch what I want to watch now, and in what format."
We know you indicated that is a challenge to broadcasters, but in your experience as the chairman of the CRTC, does it present another challenge to the regulator?
Mr. von Finckenstein: Yes, very much so. We were urged several times to do something about it, to use our legislation in order to put this whole thing in some form of mild regulation. Especially for over-the-top television, such as Netflix and so on, that there was sufficient Canadian content, that they would contribute to it, perhaps pay 5 per cent like other BDUs, broadcast distribution undertakings.
It seems to me the present legislation doesn't allow it. If any of you were to produce the legislation that does allow it, it could be easily circumvented. It is a fact of the world that in the regulated environment we have access control, that you could not have access to the airwaves, to the cable without permission by the government or the CRTC. That's no longer the case and that's the new reality we have to face.
Senator Mercer: You also suggested that perhaps the CBC should concentrate on local broadcasting, children's television, and special events and documentaries.
Is there an example of the work that limits itself to that narrow scope of programming that actually works? Perhaps the BBC would be an example but, in your estimation, could this work?
Mr. von Finckenstein: First of all, I didn't quite say what you said. I said they should not duplicate commercial broadcasters; they should try to find the gaps and produce those.
As you mentioned, BBC is a perfect example. BBC produces all sorts of things that you do not find on commercial products.
The content can't be exclusive, and I appreciate that, and the categories aren't that neat and they overlap, et cetera. But if we spend all this money and we want to have a Canadian broadcasting system that reflects Canada, surely the CBC should do exactly that. It should do the portion that we feel the commercials don't do. And as we all know, commercial programming is very much dominated by American content.
Senator Plett: Thank you, Mr. von Finckenstein, for being here this morning. In your opening statement, I think you said between 4 and 6 per cent of the population are not subscribers to cable or Internet — or do not have access to it.
Do they not have access to it, or are they just not on it because they're not interested? If 94 or 95 per cent of the people do — and I agree with your comment about how much subsidy we should be putting out there for 4 to 6 per cent — but would they be able to get it if they wanted it?
Mr. von Finckenstein: I don't know the answer; I don't think anyone does. Right now, we have coverage across the country by over-the-air television. It's only used by a small percentage and the numbers vary and there are regional variations.
It's around 6 per cent of people who watch TV over the air, who don't have a cable, a satellite connection or fibre optic, which is the new one people use. Is it really worthwhile to keep up this huge network that we have for that 6 per cent? That's what I was saying.
Last year, we forced over-the-air people, both private and public, to go from analogue to digital. They all came to me and said, "Why are we doing that? That's not where our customers are. Why do I spend this money? I'm not getting an extra customer but I'm switching from analogue to digital," investing in yesterday's technology, which we all know will not be used in the future.
That's a very good question. We said, "Look, we want the spectrum; we need it free. Our whole system is based on OTA." You get automatic transmission over cable if you are a local broadcaster. If you don't want to locally broadcast, fine. But then you do not get the right of carriage on cable anymore. All I'm saying is that this is yesterday's concept. It is time we came up with a new one. The majority of people no longer receive their signal out of the air. They receive it from cable or satellite. If that's the case, then let's change the system to reflect that and stop wasting money on maintaining a huge distribution system, which used by 6 per cent of the population.
Senator Plett: I couldn't agree more, but I don't think that answered the question. I'm not sure; maybe you don't have the answer. You say 4 to 6 per cent don't have the access. It used to be that CBC was quite important when a lot of the northern part of our country didn't have access to other television and radio shows. That is no longer the case. So my question was — and if you don't have the answer, that's fine — whether or not it was available to this 4 to 6 per cent if they chose to use it?
Mr. von Finckenstein: Right now it is and in my opening remarks I said that except in the northern area, one would have to do a study. I quite agree with you. The situation in the North is slightly different.
Senator Plett: My next question builds on the question of Senator Housakos. Previous witnesses for the study expressed concern that services such as Netflix are neither directly contributing a portion of their revenues to Canada's broadcasting system, as is the case with broadcasting distribution undertakings, nor are they subject to Canadian content requirement. Obviously, as the past chair of CRTC, you have done some polling. Are Canadians concerned about the lack of Canadian content? Do they really care?
Mr. von Finckenstein: Your assumption is wrong. We did not do any polling. That was not our job and under government rules you don't do polling unless it is under the authority of the minister. I never sought that. We never did any polling.
Senator Plett: Fair enough. Would you be willing to express an opinion or no?
Mr. von Finckenstein: Sorry, what was the exact question?
Senator Plett: Are Canadians concerned about the lack of Canadian content?
Mr. von Finckenstein: I would think, yes. I say that television is a huge educator. It reflects our country. It reflects our values, the nation and, by osmosis, you absorb it and identify with it. If we had a Canadian television system that did not reflect Canadian content I think it would be a different country, and it would be to our detriment. You asked for my personal view. I don't know if that's shared by Canadians or not. However, around the world every government regulates television and pays a lot for it because it is such a valuable tool in value shaping the national consciousness.
Senator Plett: I have one more question in this round. In 2009, while you were the chair, the CRTC decided to continue to forebear from regulating content distributed over the Internet.
With the growth of over-the-top television services and the proliferation of smartphones and tablets that receive video, can this forbearance be maintained and should it be maintained?
Mr. von Finckenstein: We struggled with this twice and we came to the conclusion that if you try to regulate it, technically speaking, you could lift the forbearance and say Netflix is a BDU. How do you enforce it? You can't enforce it. It would be a complete waste of time and effort. As we all know, the Internet is not controllable. We are not China; we do not have a wall around us. Everything that comes into that country has to go through a central point. Content can come into Canada in a huge number of ways. Right now they do it legitimately by having a Canadian Netflix, or Netflix.ca, which has different programming than Netflix.com. They put on Canadian programming and they buy it. They are complying as much as they feel is in their corporate interest, obviously. But we can't force them. Nobody has found a way in which you can control it. People are saying lift the forbearance and try to regulate the new media. How? Would somebody please tell me how we do this? There has to be access control, and access control doesn't apply when it comes to the Internet. That's the point.
Senator McInnis: Thank you for being our guest this morning. I rather suspect if we did a poll of Canadians and asked the question as to how important they feel Canadian content is, a high number of Canadians would say yes, we require it. But that's unfortunately not being reflected in where our Canadian Broadcasting Corporation is today.
In fact, in the francophone community TV and radio industry, revenue is number one, but not so in English Canada and — I'd like your view on this — they are well back in third when one looks at the revenues. Of course revenue from government, as you alluded to, has flatlined since 1990 so it appears there is not an appetite with government to subsidize. In recent times, TV advertising has plummeted and so it's not there. It's almost to the point that it could be swallowed up, almost irrelevant. I'm wondering if it is time perhaps for CBC to partner with another entity? Is that a possibility, and is it possible under our current legislation?
Mr. von Finckenstein: Well, you put forward a host of issues. First of all you said if you asked Canadians, you think they'd say yes. But you have to ask the second question: How much are you willing to pay for it? Are you willing to pay for it? Are you willing to pay extra? I'm not sure what the answer would be.
Yes, everybody is for it but if that means every Canadian would have to pay $10 per month for CBC, are they willing to pay that? You mentioned English and French. It is quite different of course because on the French side you don't have the direct competitor as you have on the English side. On the English side you have the huge nation to the south of us, the leading producer of TV content, constantly producing stuff, sending it to Canada either directly or indirectly through local licences. The competition is quite ferocious.
Lastly, should the CBC partner? Absolutely. That's what I pointed out. We have put the CBC in such a box, it is a Crown corporation, a myriad of supervisors, et cetera. If you look at what they can and can't do, and what they have to seek approval for either from the minister or the Governor-in-Council, it is not surprising that they have trouble joint venturing because they don't have the flexibility.
As an agent of Her Majesty that means whatever liabilities they acquire stays with them. It doesn't go away. They can't go into a venture and if it doesn't pay off, let it fail, go bankrupt and walk away from it. That's not possible. You would have to change the structure of the CBC and make it more of a commercial corporation and run by risk of principles. Yes, it gets funding from the government, but give it the ability to function in this new world. As I mentioned, it should have subsidiaries. For each joint venture, you could do a separate company and see if it flies or not. That way Canadian content can get Canadian talent on the air. It would be wonderful but we haven't given them the tools.
[Translation]
Senator Verner: Good morning, Mr. von Finckenstein. It is nice to see you again; it has been a long time. I apologize for being late. I missed the first few minutes of your speech just now.
I would like to approach the issue from a different angle from the one my colleague took. Although the crown corporation is going digital to adapt to the new realities, it seems that English and French networks are getting different results in terms of revenue and audiences. As a senator from Quebec, I cannot help but notice that the French network is playing its cards better, so to speak.
First of all, I would like to know how you explain those differences. What are the strengths and weaknesses of each? Between the French and English networks, which one is in a better position to survive the various upcoming changes in the long term?
[English]
Mr. von Finckenstein: Well, as my former Minister of Heritage, you know the way the CBC works is it spends disproportionately more on the French network than on the English network. Some people claim that is part of the reason, but that is a historical fact.
The other thing is with the French network you basically have a market. Quebecers like to see themselves. Like every nation, every region likes to see themselves on the television. Nobody produces anything about Quebec except either CBC/Radio-Canada or Quebecor. You have a built-in audience, and it has excellent content to boot.
On the English side, you have a huge amount of competition. You have Canadian content, but you have all the content from the south, which for some reason is very appealing and which you have to compete with, and is technologically produced at an absolutely superb level.
I think if you were to ask the bottom line of your question which is which one is more likely to survive, I think the French one is on much sounder footing than the English one, because it's more popular and there is less competition, and it actually does deliver exactly what the people are asking for.
Senator MacDonald: Thank you, sir, for being here with us this morning.
Looking at Canada's broadcasting environment, I'm curious about your opinions on how our system compares to most modern Western countries in terms of broadcasting environment, and what examples of public broadcasters in other countries, if any, have made the successful adjustments that have to be made in order to cope with the rapidly changing broadcasting landscape?
Mr. von Finckenstein: Well, my knowledge is dated, because I've been out of it for two years, but I remember at the time when we were preparing for the CBC hearings and looking at everything that the funding level in other nations is far higher than in Canada. That's number one. Second, it has a clear-cut government policy as to what is expected of the national broadcaster.
We are in a unique situation, especially on the English side, living in the shadow of the U.S. The only other example I found where that is the case was Austria and Germany.
I met with my Austrian counterpart and said, "You, as a German-speaking country, must have the same problem. You are in the shadow of Germany. How do you foster Austrian productions, et cetera?" He said to me something which absolutely stunned me. He said, "Very simple. We copy everything that you are doing, because you are our model on how to survive in the shadow of a neighbouring nation that has the same language."
That was always our big problem on the English side, that the competition from the south is so overwhelming, and to find the right niche and to make it commercially viable is very difficult. If you subsidize it, yes. There is no question the talent is there, the capacity is there, but it doesn't pay for itself. How do you fill that gap? That's why we used to do it through all sorts of regulatory and direct subsidies, but with the vanishing of access control, with the Internet taking over OTT, direct funding will become more and more important. There is no way around it.
Senator Housakos: On a couple of occasions in your testimony this morning you mentioned that the government should give the CBC the tools required to succeed. I have been listening carefully, and I heard you mention that stable funding would be one of those tools that would be vital. I agree there is a lot of difficulty for any business to plan long term when their subsidy is on a year-to-year basis. I can see it being a great challenge. What other tools besides stable funding are you referring to?
Mr. von Finckenstein: As I mentioned to one of your colleagues, you look at the whole corporate structure, make it much leaner and simpler to operate, allow them to do joint venture now in a much easier way.
The ministry oversights and the many bodies that they have to report to all costs a lot of money. For example, access to information. CBC is now subject to access to information. You know what it will cost you inside to set up the apparatus to deal with the requests even if you can charge for it. I have run two government departments, so I know how much money and time you spend on this. All of this could be lessened in order to make it simpler for the CBC to operate.
Second, your colleague mentioned commercials. Why do we even regulate how many commercials there can be on radio or TV? Why not let the market decide? Let the viewer decide. After all, it is for Canadians. If they value it, let them make their voices heard either by switching off or watching it.
Senator Housakos: Certainly you are not saying a 100 per cent government-funded agency in large part, like the CBC, would not be accountable like any other government agency would be. I understand the challenges of public access to information, but can you imagine government agencies responding to the CBC that we were not going to give them answers to their public access to information because we are trying to save money and time? I don't think that would fly.
From an administrative point of view, I understand how it can be cumbersome, but I can't see how it would in any way affect the production, the quality of their content or their ability to access market share. I'd like to have more tangible examples of what they need from the government in terms of tools or what they don't have right now at their disposal to be able to get their ratings and advertising dollars up in order to get that subsidy down.
On the one hand, you talk about how it's important for CBC to work and respond in the market environment and basically perform in the market environment. On the other hand, we're saying the government needs to give it more tools. Right now, I understand the stable funding aspect. I don't understand the aspect of them somehow bypassing basic transparency and accountability issues to their shareholders, which are the taxpayers. Therefore I need a clearer idea on what we need to do in terms of providing the tools they need to get their mandate successfully done, which is to promote Canadian content.
Mr. von Finckenstein: You say it so nicely — accountability. Yes, of course, but we're not talking about somebody who runs a port or something. We are talking about a company that is in the creation business, in the creative business. You don't want to influence that creation therefore your regulatory touch, your accountability touch, will be very light. What you want to do involves the outcome. You want to clearly say, "This is what we would like you to do," and let them use their creative ability.
By the way, for years they weren't subject to access to information legislation. I don't know why we suddenly made them subject to it. That's exactly what I'm talking about. We need to decide. If we really want a creature that is like a government corporation then fund it like that, but we don't. We fund it far less than they need and we say to them, "Earn some of it on the markets but meet all these needs and meet all the special needs."
You can also talk about some of the requirements, which is a very sensitive subject. I don't know the answer, but we could very well ask why we actually have all the broadcasts in the second language in the areas where people don't speak that language. Why not provide that over the Internet access? Nowadays practically everybody has the Internet. Why not do it that way rather than having a full-blown second language broadcast, or is that the price we have to pay for being a bilingual nation?
What you have is the constant tug between commercial realities and what you want to achieve by way of government policy. I'm all for that, but then you have to pay for it. When I say there are other tools, I'm pointing out that if you look at the corporate structure of the CBC it is neither fish nor fowl; it's neither government agency nor private sector. It is asked to compete in the private sector, so I say set it up like a private corporation and put some specific accountability to it, but not the way it is right now.
Senator Housakos: Thank you, sir.
Senator Demers: Hopefully my questions will not be ones that you have to repeat.
I did television for 11 years and what I learned in television is to give the product people want. On the French part you answered Senator Verner and we won't touch that; things are going good there.
On the English side the news is very good; hockey, we know, is extremely special for Canadians. Isn't there a time when you have to recycle yourself and give people what they want? Ratings are money and if the ratings are not there the money is not there. Is there not a time where you look at each other — and I'm not saying you, sir — and say, "We're not giving people what they want and they're going elsewhere"? As you said this morning, on the English side there is such unbelievable competition. In talking about the English side, isn't there a time when you maybe have to recycle yourself?
Mr. von Finckenstein: Recycle yourself into what — becoming an alternative CTV? Is that what we want? Do we want the CBC to say, "Okay, I see what Canadians want, I can deliver that content, too. I can buy those American shows and show them." Then it would not at all be what it's supposed to be, which is a reflection of Canada. In essence, if you look through the two pages of the objectives in the Broadcasting Act about the CBC, basically what it means is to reflect Canada to Canadians. That's the essence of it. Unfortunately, if you are doing that, it seems to be that there is no money in it, or at least nobody has found a way to do it yet.
Senator Demers: Over $1 billion plus of content; is this money going into other areas or is it staying with the people from CBC? Are they channeling money elsewhere? In the conversation we've had this morning you have answered in a gracious manner that it always comes back to money and I understand that, but maybe not all as much as you do. Is that money channeling to the right areas? We're talking about no money and we need money to do this and that, sir.
Mr. von Finckenstein: One issue I suggested is to look at having this whole network of stations across the country, including the towers, et cetera. When the CBC appears before you they will break that down according to how much they are spending on the infrastructure and how much they are spending on content. I'm saying it seems to me there's a huge amount being spent on infrastructure that really isn't needed; you're not getting your money's worth for it. In this day and age of everybody having access to wireless or cable, do we need that entire infrastructure? Up North it would be a different story but certainly not in the South. Can we not save that money and put it into content, for instance?
The Chair: Senator Plett?
Senator Plett: I cannot add anything to what my good friend Senator Demers asked. It was right along where I wanted to go so I'm fine, thank you.
Senator Eggleton: You said on a couple of occasions this morning that the CBC should perhaps be reorganized more like a commercial operation, more streamlined, whatever, but you've also said that it would be a good idea if they got involved in joint ventures. I presume they can't get involved in these now. Can you give some examples of what kind of things might help the CBC in terms of joint ventures?
Mr. von Finckenstein: They do get involved but they themselves, and certainly other broadcasters, when they appeared before me all pointed out that dealing with the CBC is extremely cumbersome and difficult because of all the restrictions and approvals they need. For instance, when you do a show which I'm sure would be of interest, let's say on the Mennonite immigration to Canada, you would obviously do it in joint venture with possibly the Ukraine or some local stations there. From what I understand, the way to structure it right now, and what has been in testimony before me, is extremely difficult for them. I wanted to make it as easy as possible for them because it is something that would undoubtedly interest Canadians, but also probably be of interest to other countries and why not? It doesn't have to be 100 per cent Canadian. We have all sorts of agreements with various nations to do that but what the CBC lacks is the corporate flexibility to do it.
Senator Eggleton: Then need the corporate flexibility first and then they can do all sorts of other things and I suppose some of those things could be revenue producing, which would help to improve their revenue base.
Mr. von Finckenstein: Yes.
Senator Eggleton: Thank you.
[Translation]
The Chair: I think we have no more questions.
[English]
I would like to thank you on behalf of the members for your participation. You will certainly inspire us as far as questions for your successors at the CRTC and, more importantly, questions for your former friends at the CBC who will probably be looking at your comments today and saying, "Oh, we have to prepare answers for those comments."
I appreciate your taking time off. We took out the palm tree but we still know you're in Florida. We appreciate the fact you took time off and came to appear in front of us.
[Translation]
We greatly appreciate your participation, and thank you very much for your presentation.
[English]
If I may, I mentioned last week that in order to get an answer from the government on the report we did on the airports and airlines we have to bring back a motion, so I will read that motion:
That, pursuant to 12-24(1), the Senate request a complete and detailed response from the Government to the Eighth Report of the Standing Senate Committee on Transport and Communications entitled: One Size Doesn't Fit All: The Future Growth and Competitiveness of Canadian Air Travel, tabled in the Senate on April 17, 2013, during the First Session of the Forty-first Parliament, and adopted on May 7, 2013, with the Minister of Transport being identified as the minister responsible for responding to the report.
Senator Plett proposes the motion. All agreed?
Hon. Senators: Agreed.
The Chair: Tomorrow night we have Florian Sauvageau and Daniel Giroux from Laval University, who will be presenting via video conference. Next week we are planning for the CRTC and CBC, and we have a full roster.
Our budget was approved by the Internal Economy Committee. The steering committee will be meeting in a few minutes to talk about our trip west, and we will be reporting to you in camera tomorrow night on a first draft on that trip.
Any questions? I move to adjourn.
(The committee adjourned.)